In a bid to address mounting pressure on the naira and stave off a potential foreign exchange crisis, Nigeria’s central bank has announced plans to conduct a retail dollar auction next week. This move comes in response to increasing foreign exchange (FX) demand that has been straining the local currency’s stability.
Thank you for reading this post, don't forget to subscribe!According to a statement from the Central Bank of Nigeria (CBN), the retail auction is scheduled to resume on August 7. The auction aims to alleviate the pressure on the naira caused by unmet FX demands, which have adversely affected its exchange rate.
Authorized dealer banks are required to submit a comprehensive list of outstanding FX demands from end customers. This step is part of the CBN’s broader strategy to manage FX demand more effectively and ensure stability in the foreign exchange market.
The recent surge in FX demand, driven by seasonal factors such as summer travel and import activities, has led to a significant depreciation of the naira. As of the latest data from the FMDQ, the naira has fallen by 2.9% to $1,617 per dollar. Over the past year, the currency has declined by nearly 70% despite efforts to liberalize its trading and attract inflows.
Previously, the CBN used retail and wholesale currency auctions to manage dollar supply, selling directly to consumers and banks. The upcoming retail auction is part of ongoing efforts to stabilize the naira and address the current FX challenges.
In related news, a recent quarterly bulletin from the CBN highlighted an increase in FX consumption over the past quarter. Despite this, Nigeria remains optimistic about future FX inflows in 2024, expected to come from sources such as World Bank budget finance, NNPC-related funds, and Eurobond issuance.
